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What would report a loss from discontinued operations of

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Reference no: EM132842530

On May 1, Rat Race Co. agreed to sell the assets of its Footwear Division to Mike's Inc. for $80 million. The sale was completed on December 31, 2020. The following additional facts pertain to the transaction:

  1. The Footwear Division qualifies as a component of the entity according to GAAP regarding discontinued operations.
  2. The book value of Footwear's assets totaled $48 million on the date of the sale.
  3. Footwear's operating income was a pretax loss of $10 million in 2020.
  4. Rat Race's income tax rate is 40%.

Problem 1: Suppose that the Footwear Division's assets had not been sold by December 31, 2020, but were considered held for sale. Assume that the fair value of these assets at December 31 was $40 million. In the 2020 income statement for Rat Race Co., it would report a loss from discontinued operations of

A) $10 million.

B) $3 million.

C) $10.8 million.

D) $18 million.

Reference no: EM132842530

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